Getting pumped up
After hitting a 17-year low last year, natural gas prices have rebounded and are on pace for a much stronger 2017.
After hitting a 17-year low last year, natural gas prices have rebounded and are on pace for a much stronger 2017, a trend that could boost local energy companies and the broader state economy.
While many drillers have focused primarily on oil production in recent years, Oklahoma still is the country’s fourth-largest natural gas producing state, behind Texas, Pennsylvania and Alaska.
Operators in Oklahoma produced 6.7 billion cubic feet of natural gas per day in October, according to the most recent numbers from the U.S. Energy Information Administration.
The price of natural gas dipped to multiyear lows in March, less than a month after oil prices hit a 17-year low. Natural gas prices plunged primarily because of a warmer-than-normal winter reduced demand while production continued to grow.
In 2017, however, demand is expected to outpace production.
“We’re really biting into production yearover-year, primarily because we’ve had a colder winter this year and forecasters are saying its going to be a relatively normal February and March,” said Tony Say, president of Oklahoma City-based Clearwater Enterprise.
Natural gas demand also is undergoing a significant change. The fuel historically has been used primarily for winter heating, leading to spikes in cold winters and price drops in the summer. In recent years, however, natural gas increasingly has been used for electricity generation, driving much larger demand throughout the summer.
“With summer power demand and the need for gas to go back into storage for winter usage, I think it will keep prices propped up this summer,” Say said.
Natural gas exports also have increased, including surging demand from Mexico and growing liquefied natural gas exports. The country’s first commercial LNG export terminal came online last year, and at least three others are expected online over the next two years.
The price of natural gas averaged $2.51 per thousand cubic feet in 2016, marking its lowest annual average since 1999, according to a report released Monday by the U.S. Energy Information Administration. In its Short-Term Energy Outlook, the agency forecast prices to average $3.55 in 2017 and $3.73 next year.
Natural gas futures gained 5 cents Thursday to $3.38 per thousand cubic feet and has been as high as $3.90 earlier this month.
“If the numbers pan out, it’s going to have a pretty significant impact on the state economy,” Say said. “There’s a lot of attention being put into the SCOOP and STACK plays, so I think you’re going to see both oil and gas volumes increase in 2017.”